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1HL  WORK  OF  THE  BUREAU 
FOR.  UNIFORM  MUNICIPAL 
REPORTING.  AUDITING  AND 
ACCOUNTING  IN  THE  STATE 
* * ? OF  OHIO  5 5 5 


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THE  WORK  OF  THE  BUREAU  FOR 
UNIFORM  MUNIGIPAL  REPORTING, 
AUDITING  AND  AGGOUNTING  IN 
THE  STATE  OF  OHIO. 


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An  Address  delivered  at  the  Meeting  of  the  League  of 
Ohio  Municipalities,  at  Dayton,  Ohio,  February  11,  1903 
by  Harvey  S.  Chase,  I.P.A.,  Public  Accountant  and  Auditor, 
8 Congress  St.,  Boston,  Counsulting  Expert  to  the  Bureau. 


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Mr.  President  and  Gentlemen: 


' Your  Secretary,  through  the  Hon.  W.  D.  Guilbert,  Auditor  of  State, 
has  requested  me  to  prepare  an  address  upon  the  work  of  the  Ohio  Uniform 
Accounting  Bureau,  or  as  it  is  legally  known,  the  “Bureau  of  Inspection 
and  Supervision  of  Public  Offices.” 

You  are  all  familiar,  doubtless,  with  the  uniform  accounting  law 
(House  Bill  No.  1050)  passed  May  10,  1902,  whereby  the  above  bureau  was 
created  and  the  work  of  systematizing  and  making  uniform  the  methods  of 
reporting,  auditing  and  accounting  in  all  the  municipalities  and  other  tax- 
ing bodies  in  Ohio  was  begun. 

You  are  also  acquainted  with  the  fact  that  the  Auditor  of  State,  under 
the  terms  of  this  act,  immediately  organized  the  bureau  by  the  choice  of 
Messrs.  E.  M.  Fullington,  A.  B.  Peckinpaugh  and  J.  T.  Tracy  as  Deputies 
and  Mr.  S.  A.  Hudson  as'  Clerk.  These  gentlemen,  having  had  much  ex- 
perience as  county  auditors  and  being  familiar  both  with  the  requirements 
of  law  in  Ohio  and  with  the  actual  practice  in  the  various  counties  of 
the  state,  are  exceptionally  well  fitted  to  carry  out  the  requirements  of  the 
uniform  accounting  law.  The  State  as  a whole,  and  Auditor  Guilbert  in 
particular,  should  he  warmly  congratulated  upon  these  excellent  selections. 

Very  shortly  after  the  formation  of  the  bureau  the  author  of  this 
paper  was  requested  to  act  as  consulting  expert. 

The  work  of  the  bureau  has  been  along  broad  lines  and  has  consisted 
in  the  main  of  the  following  matters:  1st.  A thorough  study  of  the  re- 
quirements of  the  uniform  accounting  law  and  also  a minute  examina- 
tion and  analysis  of  the  provisions  of  the  new  Municipal  Code  passed  at 
the  extra  session  of  the  legislature  last  September.  2d.  The  consideration 
of  the  “Uniform  System  for  Municipal  Accounts  and  Reports”  of  the  Na- 
tional Municipal  League,  with  which  body  your  own  Ohio  League  is  very 
closely  affiliated,  and  the  application  of  this  system  to  the  special  require- 
ments of  the  Ohio  code. 

This  “Uniform  System”  is  the  result  of  the  united  labors  of  various 
committees  upon  uniform  municipal  accounting  appointed  by  other  na- 


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tional  associations,  of  which  the  committee  of  the  National  Municipal 
League  has  acted  as  the  central  co-ordinating  body. 

On  the  various  committees  have  been  engaged  many  of  the  noted 
municipal  experts  and  students  of  municipal  affairs  in  this  country,  while 
not  a few  of  the  gentlemen  have  international  reputations. 

The  process  of  growth  of  this  “Uniform  System”  has  been  a gradual 
one  of  the  most  practical  character,  for  it  has  been  developed  not  by  theo- 
retic deductions  upon  paper  only,  but  by  actual  applications  of  the 
schedules  to  city  reports  and  accounts  in  a series  of  successive  steps. 

In  laying  out  the  system  for  Ohio  the  bureau  considered  primarily 
the  requirements  of  the  Ohio  uniform  accounting  law  for  the  publication 
by  the  bureau  annually  of  comparative  statistics  of  cities,  villages,  town- 
ships, school  districts  and  of  other  taxing  bodies,  respectively,  as  state 
documents. 

Having  considered  the  general  nature  and  form  for  these  statistical 
reports, — in  which  it  is  intended  to  set  before  the  people  comprehensive 
tables  of  comparisons  of  the  financial  results  in  all  taxing  bodies  of  the 
same  class,  so  that  any  citizen  can  see  for  himself  what  these  results  are  in 
his  own  municipality  and  compare  them  with  the  results  in  other  munici- 
palities— it  was  then  decided  what  requirements  should  be  laid  upon  the 
accounting  officers  of  the  cities.  The  largest  cities  were  first  considered,  and 
the  forms  of  the  reports  from  these  offices  were  drawn  up  in  such  a man- 
ner as  to  furnish  the  information  needed  by  the  bureau,  from  each  city,  to 
make  up  the  comparative  statistical  tables  above  mentioned. 

Having  worked  out  in  detail  the  forms  for  these  tables  and  reports 
to  the  bureau  by  the  various  city  auditors,  there  was  next  considered  the 
forms  of  the  books  and  the  arrangement  of  colums,  ledger  titles,  system 
of  vouchers,  cash  tickets,  etc.,  etc.  The  question  being  what  will  be  essen- 
tial in  order  that  the  various  city  auditors  may  furnish  these  reports  to 
the  bureau  promptly  at  the  end  of  the  fiscal  year,  promptness,  as  well  as 
accuracy,  being  essential  if  these  reports  are  to  be  of  value  to  those  for 
whom  they  are  intended. 

It  is  evident,  therefore,  that  the  bureau  has,  necessarily,  worked  back- 
ward through  four  successive  steps  before  it  could  arrive  at  the  final  forms 
of  pages,  columns  and  other  details  of  the  books  of  original  entry.  It  is 
also  evident  that  these  forms  and  schedules  which  the  bureau  has  been 
obliged  to  consider  last,  are  in  reality  the  matters  that  come  first  in  the 


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bookkeeping,  and  are,  therefore,  the  things  that  every  city  auditor  desires 
to  see  first,  and  only  after  these  have  come  to  his  attention  does  he  desire 
to  follow  on  through  the  system  in  regular  order,  but  in  the  opposite  direc- 
tion to  that  necessarily  pursued  by  the  bureau  in  laying  out  the  system. 
Therefore  to  make  this  whole  matter  perfectly  clear,  I will  recapitulate 
the  various  steps  which  the  bureau  was  compelled  to  take,  as  follows: 

First — Consideration  of  the  statutes. 

Second — Consideration  of  the  proposed  statistical  documents  to  be 
published  by  the  bureau. 

Third — Consideration  of  the  forms  and  schedules  for  city  auditors’ 
reports  to  the  bureau,  as  the  basis  of  the  above  documents. 

Fourth — General  arrangement  of  city  auditors’  ledgers  and  ledger 
accounts  corresponding  with  the  above  required  reports  from  these  officials, 
so  that  these  figures  can  be  taken  off  immediately  at  the  end  of  the  fiscal 
year. 

This  brings  us  to  the  fifth,  the  details  of  the  accounting  system  as 
already  mentioned. 

Throughout  all  this  very  complicated  labor,  in  which  the  bureau  has 
had  no  precedents  to  guide  it, — for  this  is  the  first  time  that  an  entire 
state’s  bookkeeping,  including  the  accounts  of  firsc-class  cities,  has  been 
overhauled  and  systematized, — it  has  been  necessary  for  the  bureau  to 
keep  in  mind  the  important  fact  that  the  system  to  be  finally  adopted 
should  not  depart  further  than  is  necessary  from  the  system  in  practical 
use  in  the  cities  of  Ohio  today.  That  is,  its  system  should  be  in  the  line  of 
evolution  not  of  revolution. 

To  this  end  we  have  made  a careful  study  of  the  systems  in  use 
in  the  leading  cities  and  the  bureau’s  system  will  contain  the  exceptionally 
good  features  of  many  of  these  present  methods,  while  eliminating  many 
other  features  which  cannot  be  reconciled  with  the  requirements  of  uni- 
formity. 

I have  considered  it  needful  to  make  this  preliminary  statement  of  the 
theory  upon  which  the  bureau  has  necessarily  acted  before  taking  up  and 
explaining  the  forms  and  tables  so  far  drawn  up  and  tentatively  adopted 
by  the  bureau. 

I will  not  attempt  to  consider  here  the  statistical  publications  of  the 
bureau,  as  these  documents  can  only  be  published  after  a twelve-months’ 
period  has  elapsed  and  the  annual  reports  from  the  cities  have  been  re- 


5 


ceived  and  tabulated.  We  will  now,  therefore,  consider  the  forms  for  the 
city  auditor’s  reports  to  the  bureau.  These  forms  are  intended  to  com- 
prise also  the  general  arrangement  of  the  city  auditor’s  annual  reports 
to  their  councils  and  the  citizens.  The  annual  report  of  each  city  auditor 
to  the  bureau  will  comprise  the  following  schedules: 

“A.”  Revenue  and  expense  for  the  year. 

“B.”  Assets  and  liabilities  at  the  end  of  the  year. 

It  should  be  unnecessary  to  state  that  all  the  accounting  should  be 
kept  in  “double  entry.”  There  is  no  other  system,  as  you  all  know;  double 
entry  is  imperative  as  a starting  point,  and  it  is  unnecessary  for  us  to  go 
further  into  the  a,  b,  c,  the  alphabet  of  book-keeping,  here.  This  funda- 
mental being  settled,  we  will  consider  the  bureau’s  schedules.  The  sched- 
ules are  based  upon  the  National  League’s  system,  modified  so  far  as  is 
necessary  to  fit  the  particular  requirements  of  law  in  Ohio. 

The  first  important  feature  of  the  system  is  the  distinction  between 
“revenue  and  expense”  accounts,  “A  ’ schedules,  which  are  statements  of 
the  receipts  and  expenditures  of  the  fiscal  year,  and  the  “balance  sheet” 
accounts,  “B”  schedules,  which  are  statements  of  the  city’s  assets  and 
liabilities  at  the  end  of  the  fiscal  year. 

ARRANGEMENT  OF  TOTALS. 

The  second  important  feature  of  these  schedules  is  the  arrangement 
of  the  summaries  or  statements  of  totals.  These  follow  in  order  of  im- 
portance, and  precede  the  detailed  statements  in  every  case,  i.  e.,  first  ap- 
pear consolidated  summary  statements  (Schedules  A-I,  B-I,  etc.).  Then 
subsidiary  detailed  statements  of  the  items  in  the  first  schedule.  Then 
more  detailed  statements  of  the  items  in  the  secondary  schedules,  and  so 
on  down  to  the  least  important  details  of  the  accounts. 

The  third  important  feature  is  the  emphatic  distinction  between  “or- 
dinary” revenue  and  expense  and  “extraordinary”  revenue  and  expense. 
The  former  relates  only  to  the  income  of  the  city  from  ordinary  sources, 
excluding  sales  of  bonds  and  other  capital  accounts,  and  to  the  expenditures 
of  the  city  for  ordinary  running  expenses,  i.  e.,  for  operation  and  main- 
tenance. The  latter — extraordinary — relates  only  to  the  income  from  ex- 
traordinary sources,  like  borrowed  money,  etc.,  and  to  expenditures  for  per- 
manent construction  or  other  capital  outlay. 


6 


The  fourth  important  feature,  and  the  one  which  is  practically  the 
creation  of  the  National  League,  is  the  arrangement  of  the  totals  and 
afterwards  the  details  of  the  departments’  accounts,  not  in  alphabetical 
order,  as  has  been  the  customary  method  heretofore  in  city  accounts,  which 
renders  all  comparisons  forever  misleading  and  difficult,  but  in  an  order 
based  upon  the  general  purpose  or  function  of  each  department  or  division 
of  the  municipal  government. 

Schedule  A-i  gives  the  consolidated  summary  of  the  total  cash  re- 
ceipts and  expenditures  for  the  fiscal  year,  not  including  duplicated  items, 
which  are  given  elsewhere. 


REVENUES  AND  EXPENDITURES. 

Schedule  A-n  divides  the  total  revenues  and  expenditures  into  distinct 
categories,  “ordinary,”  “extraordinary”  and  “trust  funds,”  which  together 
make  up  the  actual  cash  transactions  of  the  city,  omitting  duplications. 
These  duplications,  viz. : transfers,  refunds,  rebates,  re-loans,  temporary 
tax  loans  repaid,  etc.,  are  set  up  below  in  totals,  with  the  title  “Tempo- 
rary Accounts.”  The  grand  totals  of  Schedule  A-n,  which  include  these 
duplications,  make  up  the  totals  per  the  Auditor’s  books  and  cover  all  the 
financial  transactions  of  every  kind  which  have  passed  through  the  books 
of  the  city  auditor  during  the  year. 

Schedule  A-iii  takes  up  a more  detailed  study  of  the  “ordinary” 
and  “extraordinary”  items,  arranged  in  groups,  according  to  general  pur- 
poses and  functions,  and  considers  the  questions  pertaining  to  “funds.” 
These  fund  questions  are  exceedingly  important,  and  will  be  fully  con- 
sidered later  in  this  paper. 

Schedule  A-iv  expands  the  items  of  the  previous  schedule  in  still 
more  detailed  figures  and  gets  down  to  the  receipts  and  appropriations  and 
expenditures  by  departments  and  divisions,  still  grouped  according  to  the 
league’s  system  as  adapted  to  the  Ohio  code. 

Schedule  A-v  and  A-vi  are  for  trust  funds  and  temporary  accounts. 

Schedule  A-vii  takes  up  the  budgetary  questions,  balances  forward, 
appropriations,  additions,  expenditures  and  balances  remaining,  transfers 
to  and  from,  etc.,  with  the  departments  still  grouped  as  before,  and,  finally, 
Schedule  A-viii  consists  of  the  ultimate  details  of  each  department’s  ac- 
counts, so  far  as  the  Auditor’s  reports  will  deal  with  them,  taken  up  in  or- 
der separately  and  with  sufficient  space  given  to  each,  so  that  all  the  im- 


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portant  divisions  of  the  expenditures,  viz.,  salaries,  expenses,  rent,  light- 
ing, printing,  etc.,  can  be  completely  set  forth. 

It  will  he  seen  that  the  schedules  progress  consistently  and  steadily 
from  the  gross  statements  to  the  details,  each  schedule  being  an  amplifi- 
cation of  the  preceding  one  and  in  complete  harmony  with  it,  and  all  ar- 
ranged upon  a definite,  consistent  and  uniform  system  applicable  to  any 
and  all  municipal  accounts. 

SECOND  GRAND  DIVISION. 

The  second  grand  division  of  the  schedules  relates  to  the  assets  and 
liabilities  of  the  city,  labeled  “B,”  and  these  also  are  logical  and  clear. 

B-i  gives  the  assets  and  liabilities  in  gross  figures,  arranged  to  show 
first,  the  total  current  assets  (cash,  taxes  not  yet  collected,  etc.),  as  against 
the  total  current  liabilities  (vouchers  not  paid,  etc.)  ; secondly,  the 
contingent  or  doubtful  assets  and  liabilities;  thirdly,  the  trust  funds  and 
special  deposit  accounts  for  which  the  city  acts  as  agent  or  trustee,  and, 
finally,  the  actual  sinking  funds  on  the  asset  side  contrasted  with  total 
bonded  debt  on  the  liability  side. 

The  permanent,  but  not  available,  assets  of  real  estate,  buildings, 
equipment,  etc.,  are  also  stated  in  totals,  and  are  offset  by  a balance  account 
or  surplus  on  the  credit  side.  This  “surplus”  is  detailed  in  Schedule 
B-vn. 

Thus  a concise  and  accurate  statement  of  the  condition  of  the  city  at 
the  end  of  each  year  is  given  at  a glance. 

The  succeeding  “B”  schedules  are  amplifications  of  the  items  in  this 
first  schedule  up  to  and  including  B-vii,  and  thereafter  may  be  carried 
out  by  succeeding  schedules  into  any  details  which  are  considered  important 
by  the  officials  in  any  particular  city. 

THE  FUNDS. 

By  the  code  there  is  established  in  each  city  various  funds  into  which 
are  received  the  proceeds  of  the  tax  levy,  not  to  exceed  ten  mills,  and  in  ad- 
dition there  are  established  as  many  other  funds  as  there  are  special  levies, 
ATiz.,  school  fund,  library  fund,  sinking  fund,  interest  fund,  etc. 

Out  of  the  proper  fund  are  taken  the  appropriations  by  Council  at 
the  beginning  of  each  six  months,  these  appropriations  being  limited  to  the 


amount  already  in  the  fund — each  balance  thereof — together  with  the 
amounts  properly  estimated  to  come  in  during  the  current  six-months 
period. 


HANDLING  OF  APPROPRIATIONS. 

These  appropriations,  duly  made  by  Council,  will  be  taken  by  the 
City  Auditor  and  set  up  in  his  general  books  through  a journal  entry 
charging  the  proper  fund  account  and  crediting  the  various  appropriation 
accounts.  The  form  of  this  journal  entry  should  correspond,  evidently, 
with  Schedule  A-iv  of  the  uniform  system,  so  that  the  opening  and  all 
subsequent  entries  may  fit  in  with  the  requirements  for  the  annual  report 
upon  this  schedule  at  the  end  of  the  year.  This  requirement  is  also  funda- 
mental, and  should  be  noted  very  carefully  by  all  City  Auditors,  City  So- 
licitors and  City  Councils. 

The  appropriations  having  thus  been  set  up  as  credits — each  appro- 
priation upon  its  own  page  of  the  ledger  as  a credit — the  expenditures  are 
entered  by  the  Auditor  in  monthly  totals  against  these  credits,  and  the 
available  balance  of  the  appropriation  should  be  shown  by  a balance 
column  in  the  ledger. 

At  the  end  of  the  year,  twelve  monthly  charges  having  been  made 
and  two  semi-annual  credits  having  been  posted,  the  credit  balance,  if  any, 
will  be  returned,  through  a journal  entry,  to  the  credit  of  the  proper  fund, 
as  required  by  the  code. 

It  is  evident  that  by  these  means  the  gross  expenditures  under  each 
appropriation  will  be  ready  immediately  upon  closing  the  books  Decem- 
ber 31,  to  be  taken  off  upon  Schedule  A-iv  and  be  transmitted  to  the 
bureau. 

There  will  be  one  “appropriation  ledger,”  comprising  the  accounts  in 
Schedules  “A”  (which  can  be  divided  into  two  or  more  books,  if  necessary, 
in  the  larger  cities)  and  one  balance  sheet  ledger  containing  the  accounts 
or  Schedules  “B.” 

If  the  appropriation  ledger  “A”  is  subdivided,  it  should  be  into  “A” 
appropriations  only,  general  fund,  and  “AA,”  special  funds  accounts, 
schools  (if  included  in  Auditor’s  accounts),  etc.  Special  assessment  ac- 
counts should  also  be  set  up  in  a separate  ledger,  “S.  A.”  By  this  dis- 
tinction in  the  ledgers  the  extraordinary  items,  which  relate  only  to  capi- 
tal accounts,  i.  e.,  to  balance  sheet  accounts,  will  be  completely  separated 


9 


from  the  ordinary  (maintenance)  items,  which  are  Ledger  A accounts. 
This  distinction  is  also  fundamental. 


COLUMNAR  CASH  JOURNALS. 

Preceding  these  ledgers,  in  the  accounting,  there  will  be  columnar 
cash  journals  of  a size  convenient  for  handling  and  of  a number  sufficient 
to  comprise  in  their  ‘columns  all  the  active  accounts — impersonal — of  the 
city,  i.  e.,  all  of  the  appropriations  and  the  subdivisions  under  these  ap- 
propriations. There  will  be  three  or  four  of  these  books  An  a small  city 
and  perhaps  twenty  or  thirty  in  a large  city.  The  ledgers  herein  ex- 
plained correspond,  in  the  main,  to  the  present  general  books  of  Cincinnati, 
while  the  columnar  cash  journals  correspond  almost  exactly  to  the  books 
used  for  many  years  in  Cleveland.  In  a large  city  the  receipts  journals 
and  the  expenditures  journals  will  be  different  books;  in  a small  city 
they  may  be  consolidated.  Each  warrant  or  group  of  warrants  will  be 
entered  in  gross  in  one  column  of  the  cash  journal  and  distributed  in  detail 
among  the  other  columns  under  the  proper  headings,  these  headings  being 
printed  in  with  the  book.  Each  page  of  the  cash  journal  will  be  self- 
proving;  the  total  of  detail  columns  must  equal  the  total  of  the  gross 
column.  At  the  end  of  the  month  the  totals  are  posted  to  the  ledgers  and 
the  process  begins  again. 

It  is  unnecessary,  in  fact,  impossible,  to  go  into  all  the  details  of  such 
a system  in  a paper  like  the  present  one.  These  details  will  be  worked 
out  practically  and  thoroughly  as  each  city  takes  it  up  by  the  examiners 
for  the  bureau.  Enough  has  been  given  here,  possibly,  to  allow  you  gen- 
tlemen to  get  a general  idea  of  the  bureau’s  plans  so  far  as  they  have  been 
completed  up  to  the  present  time. 

TACKLING  THE  CITIES. 

The  bureau  has  decided  to  undertake  at  first  the  examination  and  re- 
arrangement of  the  annual  reports  of  the  five  largest  cities  of  Ohio,  viz., 
Cleveland,  Cincinnati,  Toledo,  Columbus  and  Dayton,  and  to  confine  itself 
to  these  cities  for  the  present.  Various  members  of  the  bureau  are  now 
at  work  in  these  cities,  endeavoring  to  run  up  against  as  many  of  the 
“bumps”  as  possible  and  to  unearth  as  many  of  the  “bugs”  as  possible, 
these  “bumps”  and  “bugs”  being  the  knotty  points  and  problems  peculiar  to 
each  city  which  require  thorough  attention  and  investigation  before  the  new 
methods  can  be  finally  applied  and  stay  applied. 


10 


There  are  many  of  such  intricate  problems,  of  course,  and  we  must  ask 
you  all  to  be  patient  with  us,  as  members  of  the  bureau.  Criticise  us  by 
all  means,  but  criticise  us  in  a friendly  spirit,  remembering  that  the  task 
which  the  legislature  laid  out  for  us  is  an  overwhelming  one.  One  that 
is  new  in  the  history  of  this  country,  if  not  in  the  history  of  the  world, 
and  one  that  will  take  a long  time  and  much  arduous  labor  to  complete. 

The  aim  of  the  bureau  is  to  assist  you,  to  work  with  you  and  for  you 
as  municipal  officers,  to  make  your  labors  more  effective  by  means  of  the 
uniform  system,  and  we  therefore  hope  you  will,  in  the  same  spirit, 
work  with  us  and  for  us. 

Ohio  has  put  herself  upon  a pinnacle  before  the  world  by  the  passage 
of  this  uniform  accounting  law,  and  although  this  enactment  was  preceded 
some  ten  years  by  a somewhat  similar  law  in  Wyoming,  yet  the  circum- 
stances and  the  great  size  of  the  Ohio  cities  and  the  magnitude  of  their 
financial  transactions  so  completely  overshadow  Wyoming  that  the  project 
is  substantially  a new  one,  and  its  success  will  redound  solely  to  the  credit 
of  this  State  and  thereby  to  the  credit  of  all  of  us  together;  to  you,  gentle- 
men, as  much  as  to  the  bureau,  if  by  active  and  persevering  co-operation 
there  is  finally  attained  a practical,  every-day  system  of  uniform  municipal 
accounting  and  reporting  in  the  great  State  of  Ohio. 


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